The world's biggest commodities trader Glencore is in talks to buy mining group Xstrata in an all-share transaction that could create a combined group worth more than $US79 billion.
Glencore already owns 34% of Xstrata and a tie-up between the two - a deal which would trump Rio Tinto's $38 billion acquisition of Alcan in 2007 - had long been expected, as Glencore aims to add more mines to its trading clout.
Investors and analysts say the main potential stumbling block, after years of on-off talks, will be the price, with Xstrata shareholders signalling they want to see the growth profile of their company recognised in any offer.
James Bevan at CCLA Investments says a merger might be good for both companies.
He says Glencore's position is primarily in commodities trading and marketing and Xstrata is much more in mining.
Mr Bevan says if they were put together it would be the world's fifth largest combined mining and commodities company and about 20% of its revenues would come from trading.
He says it would be quite dominant in some parts of the markets, it would have about a third of the world's thermal coal, about 15% of zinc and it would also be a major player in copper.
Shares in the two firms rose on the news, though both sides say there's no certainty an offer would be made.
Analysts at Credit Suisse estimate the savings from merging at about $468 million, roughly 5% of their combined 2012 profits, thanks to a better use of Glencore's marketing capabilities.